Why Applied Materials, Inc. (AMAT), Tesoro Corporation (TSO) and United Continental Holdings Inc (UAL) Are 3 of Today’s Best Stocks

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Friday was another lethargic day for equities as U.S. stocks were dragged lower by oil prices, but the S&P 500 notched its best weekly performance of 2016 despite being little changed in the past two sessions. The Nasdaq Composite turned in its best weekly performance in three months, a welcomed sign for investors that have seen the technology-heavy benchmark tumble 10% year-to-date.

Why Applied Materials, Inc. (AMAT), Tesoro Corporation (TSO) and United Continental Holdings Inc (UAL) Are 3 of Today's Best StocksEconomic data out Friday suggests inflation is on the rise, which is bad news for consumers because the primary catalysts behind the uptick in inflation were rents and healthcare costs. Additionally, the modest rise in costs is seen as giving the Federal Reserve room to boost interest rates this year.

The good kind of inflation — share price appreciation — was delivered today by some well-known stocks, including Applied Materials, Inc. (NASDAQ:AMAT), Tesoro Corporation (NYSE:TSO) and United Continental Holdings Inc (NYSE:UAL).

Applied Materials, Inc. (AMAT)

Shares of semiconductor equipment manufacturer Applied Materials surged 7% on volume that was nearly double the daily average after the California-based company delivered fiscal first-quarter results that topped Wall Street estimates while guiding higher for the current quarter. The company said it is winning “substantial” share as the 3D NAND market expands.

The bullish guidance garnered Applied Materials an upgrade from Needham & Co., which raised its rating on the stock to buy from neutral with a $22 price target. That is about 22% above where shares of Applied Materials closed today. Needham & Co. expects Applied Materials will earn $1.32 per share this year on revenue of $9.65 billion, up from a previous estimate of earnings of $1.22 a share on sales of $9.38 billion.

Three other sell-side analysts reiterated buy ratings on the stock today. Credit Suisse reiterated an “outperform” rating on Applied Materials while slightly boosting its price target on the shares to $24, implying upside of almost 33% from Friday’s close.

Tesoro Corporation (TSO)

Although there was not much news directly pertaining to this name, Tesoro was one of the leaders in Friday’s rally for refiners equities, a rally that was buoyed by a 3.6% in West Texas Intermediate futures. Refiners, which were the energy sector’s standout performers last year, have been under pressure this year due to narrowing crack spreads.

The crack spread is the difference between a refiner’s input cost (oil) and the cost to turn that oil into into a derivatives product. In plain English, crude’s recently rally has pinched refiners because higher oil prices can narrow the crack spread, in turn weighing on refiners’ profitability.

Shares of Texas-based Tesoro climbed nearly 5.1% today.

United Continental Holdings Inc (UAL)

Speaking of lower oil prices, that was likely one reason why shares of United Continental climbed 3.2% today. Citing a filing with the Securities and Exchange Commission, several media outlets are reporting that United Continental plans to buy back $1.5 billion of its own shares during the current quarter — double the previously planned amount.

Aided by lower oil prices and rising fees, airlines’ profits have been surging in recent years, which has prompted some of the major carriers to increase shareholder rewards. That includes buybacks and dividends, but United Continental is the only one of the four largest U.S. carriers that currently does not pay a dividend.

As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.

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Todd Shriber has been an InvestorPlace contributor since 2014.


Article printed from InvestorPlace Media, https://investorplace.com/2016/02/why-applied-materials-inc-amat-tesoro-corporation-tso-and-united-continental-holdings-inc-ual-are-3-of-todays-best-stocks/.

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